Mastering the digital advantage in
transforming customer experience
Digital
services and operations are raising the competitive bar in every sector. To
capture the opportunity, incumbents should embrace a new operating model that dramatically
improves the digital customer experience. Here’s how.
Improving customer experience delivers
real benefits to companies that successfully execute customer-centric
strategies. Across sectors, satisfied customers spend more, exhibit deeper
loyalty to companies, and create conditions that allow companies to have lower
costs and higher levels of employee engagement.1In
that dynamic of value creation and durable competitive advantage, delivering
digital services and operations has emerged as a prime mover in reshaping
customer experience in almost every sector. As digital pure plays such as
Amazon, Apple, and Uber continuously reinvent themselves by delivering simple,
immediate, and individualized experiences, even traditional
business-to-business2players
in sectors such as chemicals and steel are making bold moves to build dynamic
shared digital ecosystems around customer needs.
It is clear that customers, stoked by digital-first
attackers and those playing catch-up, will only expect more digital solutions.
Our research finds that growing customer expectation of superior service drives
efforts to advance and refine digital solutions. In our research, 70 percent of
app users preferred added functionality over “look and feel” of the app, and 61
percent of customers said they were more likely to buy from companies
delivering custom content. Three-quarters of online customers said they
expected help within five minutes, have used comparison services for consumer
goods, and trusted online reviews as much as personal recommendations.
It is also clear that those expectations will continue
to evolve quickly, pitting incumbent companies’ profitability against their
ability to deliver services in new ways and master a complex landscape of
technologies, marketing approaches, and operational capabilities. Within this
dynamic and rapidly changing landscape, important opportunities will manifest
themselves to build revenue, deepen customer experience, and reduce cost. A strong
will to succeed will be a prerequisite, but by itself will be insufficient to
grasp competitive advantage. What is required is a more radical abandoning of
traditional ways of working in favor of new approaches. By rethinking
traditional operating models that hinder companies from achieving their
potential and combining digital technologies and operating capabilities in an
integrated, well-sequenced way, companies can create customer-centric
strategies that can sustain new levels of speed, agility, efficiency, and
precision.3
Toward a
next-generation operating model
One typical shortcoming of traditional operating models
is a strong focus on optimizing internal capabilities instead of making the
customer’s needs and wants the organization’s central orientation point. The
strong individual silos that make up the organization of so many of today’s
organizations are another barrier, at odds with the need for achieving truly
cross-functional collaboration. Still, other companies remain loyal to big
project pipelines that they deliver in a traditional waterfall-like manner,
with a long development process and a big announcement at the end, rather than
continuously testing and iterating change in a manner more closely tuned to
market changes. Finally, in many cases a relentless top-management commitment
to embracing digital solutions is missing.
From our digital customer experience and
service-operations work with leading practitioners, we have distilled elements
that we believe are critical in shifting away from running uncoordinated
efforts within organizational silos to launching an integrated
operating model organized around customer
journeys or the end-to-end experience of a customer buying
a product or service. This framework offers a perspective on those elements
that help companies to dramatically increase digital customer experience,
establish a true omnichannel perspective within their organizations, and drive
digitization. In our experience it is possible for companies to successfully
pursue such deep transformations, starting with a design of the operating
model, and then transforming the customer journeys that matter most, while
simultaneously building an agile and cross-functional approach to
customer-centric organization transformation at scale.
The digital component
in transforming customer experience
In this article we focus on what we’ve learned in
building this operating model and the four success factors that are key to
delivering superior digital experiences, as well as the challenges that
companies across industries face in efforts to secure them. The success factors
are as follows:
·
designing
and digitizing customer journeys
·
increasing
speed and agility in insight generation
·
achieving
customer adoption of digital customer journeys
·
developing
agility in delivering journey transformations
It is no surprise that a lot of digital journey
transformations struggle to succeed, considering that running a digital
customer-experience transformation is a complex, multidimensional task. It
requires a combination of traditional transformation elements—such as rigorous,
top-management commitment and steering—and cross-functional teamwork, as well
as more digital elements, including agile delivery of technology, along
all-journey transformation phases. That said, the effort can pay off
handsomely; in our work we regularly observe up to 15 percent revenue increases
and simultaneous reductions in cost to serve of more than 20 percent.
Customer-centric
design of customer journeys
A key to offering an outstanding digital customer
experience is creating a radical design (or redesign) of journeys to be
improved. What we have found to work extremely well is to apply design-thinking
methodologies and to conduct a design boot camp. Such a starting point is also
how to best begin the process of developing an agile digital delivery system
within a cross-functional team.
In this process, the primary goal is to thoroughly
rethink the way the journey works, instead of simply fixing inefficiencies
along the way. The customer and his or her needs and preferences is both the
starting point as well as the ongoing proof point for the work, meaning that
new designs are immediately tested and iterated based on customer feedback.
Within such redesign workshops, it helps to render the customer journey in a
clickable prototype in order to obtain a more concrete look and feel of the
actual customer experience, which can then be continuously tested with
customers. Overall, the approach must, however, allow for seamless integration
with existing channels, including non-digital
journeys. Furthermore, legacy processes, which become redundant
as a result of the new journey, should still be run in parallel until the new
journey is fully operational.
One promising approach is what we call zero-based
journey redesign, or designing a customer journey from scratch, without any
preconception of the ultimate vision for the journey—rather than simply
improving the status quo. One ambitious redesign of the instant account-opening
process at a large bank eliminated 15 process steps (including significant
paperwork), introduced an instant identification system (via passport and
face-recognition software), and established a completely new online and mobile
(and in-branch self-service) journey enabling account opening anytime and
anywhere. With the inclusion of the in-branch self-service customer journey,
the effort boosted self-service sales from zero to more than a third of total
sales, with 50 percent higher conversion rates and a reduction in cycle time to
ten minutes, compared with between two and six days previously.
Similarly, a redesign of the customer-relocation journey
for a large, multinational energy company introduced an approach to automated
communication that reduced process steps for customers by half and accelerated
processing time by 80 percent, while also making it easy for customers to move
their accounts at any time during or after their relocation, via a range of
devices. These changes decreased cost to serve by 40 percent and tripled the
retention rate of relocating customers. By embedding design thinking in the
organization, management was also able to form a new vision of how customers
could experience their redesigned services in the future for a broad range of
customer journeys.
Increasing speed and
agility in generating insights
Digitization and the fast pace of changing market and
consumer dynamics require fast, frictionless “real time” insights into a
multitude of different areas for decision making, specifically customer-journey
management and design.
However, traditional market-research approaches are
often not in line with these requirements—they take too long to be generated
and don’t enable iterative step-by-step building of new experiences integrating
constant customer feedback. Thus, customer-experience leaders need to find ways
to be agile in generating insights, for example, by employing much more
flexible and dynamic research approaches. Among these are mobile flash surveys
and online focus groups, as well as the integration of these insights directly
into the customer-experience design and redesign process.
Generating insights in an “agile” way in a
digital-customer-experience transformation can start with conducting an
in-depth user-experience assessment of current customer touchpoints, such as
web properties, devices, call centers, and branches. These can then be compared
with competitors. By combining this exercise with the zero-based approach to
rethinking the customer journey, it is possible to generate valuable insights
as to the strengths and weaknesses of the digital customer-experience design.
During the journey design process, agile insights can
then be used to rapidly test new ideas and journey steps with customers, with
more scale than traditional focus groups. For example, it is possible to use an
online focus group with a carefully selected target audience or live video
chats with customers sitting at home testing out a new digital process on
screen to provide immediate insights that can help to fine-tune key journey
steps. One large European energy player used customer-experience-measurement
software to integrate input from text messages, web, and email surveys. One
large insurer created digital “diaries” to better understand customer pain
points.
Achieving customer
adoption of digital customer journeys
The awareness of how to build effective digital channels
has risen significantly in recent years. However, a typical pitfall we observe
is that many projects falter because not enough thinking goes into actively
stimulating customer adoption. There are a number of reasons why customers fail
to adopt digital channels. In some cases they are related to sales barriers,
such as a preference for in-person contact, the speed with which a product is
delivered, or e-care challenges, including a lack of personalized experience.
Consequently, customers don’t embrace digital self-service channels to the
degree desired, limiting efficiency gains and cost savings. Thus, orchestrating
and stimulating digital customer adoption thoroughly is a key success factor.
In our experience, there is no “silver bullet” to
stimulate customer adoption of digital journeys. Rather, the answer lies in
pulling a combination of different levers and iterating approaches based on
customer testing. Broad strategies, each with their own tactics, include
informing the customer, making the customer journey relevant to the customer,
and guiding him or her to engage:
·
Informing the customer
Using
effective marketing techniques, such as search
engine optimization (SEO), search engine advertising (SEA), or offline
campaigns, is critical for engaging consumers. Despite focusing on creating
digital channels, there still needs to be a well-formed mix between
traditional- and digital-media techniques. A great example for this combination
is the market launch of Foodora in Germany, where the company successfully
applied a mix between SEO/SEA, online awareness campaigns, and offline
out-of-home penetration. Other digital pure plays like Amazon and Zalando
followed similar strategies.
Explaining
the usage of the new digital channels, for example,
through videos at physical touchpoints, can also be a highly effective
mechanism to promote adoption. Players like Deutsche Telekom, which promotes
new cloud services; Alaska Airlines, with home check-in and baggage-tag
printing; or HSBC, with its tutorial videos on redesigned online banking are
companies that have taken this approach.
Triggering
initial usage through testing, user groups,
and by pushing reviews has allowed some players to stimulate feedback and word
of mouth to gain a critical base.
·
Making the digital journey relevant
Pooling
relevant content and creating a delightful experience,
for example, by bundling functionalities in one app, is key, especially for
digital channels that are not frequently used. There is only a limited number
of apps that individual customers use, and so these need to contain as much
content as possible from the same company. In Turkey, insurer Allianz decided
to pool functionalities for health insurance, claims submission, and other
services in one app instead of offering multiple apps, which would have a much
lower likelihood of usage by consumers.
Include
high-frequency services to stay in use (for
example, gamification and feedback opportunities). An effective example of this
is from the Chinese insurer Ping An, which includes multiple engaging
functionalities in its Good Doctor app. In this way, the company triggered
higher usage and was able to collect valuable behavioral customer data.
Continuously
improve and innovate digital journeys. Draw from
user-experience data to increase adoption and success of digital channels over
time. Based on effective user-experience assessments and customer tests, some
companies have used such simple tactics as developing a new landing page or changing
the colors of functional elements on websites to improve subscriptions and
click-through rates.
·
Guiding the customer
Providing
incentives is also a major driver for digital adoption.
Offering bonus points or other financial rewards is a common approach. This
strategy is exemplified by the British Sunday Times’s competitive
pure-digital subscription offer over traditional ones.
Reducing
the effectiveness or limiting access to competing or legacy channels
allows companies to further nudge laggard adopters. This signals commitment and
confidence in new digital tools or channels. For example, airline Wizz Air
offers digital support on its website for free, while charging a service fee of
15 euros when seeking help from the call center.
To encourage customer adoption of digital journeys, it
is critical to not simply rely on the quality of the channel but to find a
suitable, individual solution using multiple levers to drive adoption.
Furthermore, it is essential to achieve internal alignment in the organization
across channel and business-unit leadership. Conflicts that arise among leaders
on strategy, targets, incentives, and mind-sets can be highly disruptive.
Developing agile
delivery of journey transformations
Delivering customer-journey projects often poses a stiff
challenge to companies, particularly when it requires solving technological and
IT-related issues.
Traditional waterfall delivery models build up research
and testing over a long period of time and typically introduce a new effort
with fanfare and a big announcement. In contrast, digital leaders increasingly
rely on delivering customer-journey transformations following agile
methodologies in which high-performing, cross-functional teams work toward a
common, customer-centric vision, relying on real-time decision making, rapid
iteration, and end products that can be presented and refined continually.
There are some key advantages to this:
·
Cross-functional
teams—including representation from the business, information technology, and
other support functions, such as back-end operations—colocate and
collaboratively work together toward a single vision for a new customer
experience.
·
Disaggregating
project complexity, by defining a minimal viable product, can deliver a product
or service to the customer in only a few months, rather than in a year or more
for traditional approaches. Continuous improvement is also possible.
·
A
joint push for development in weekly or biweekly sprints set up the team for
quick successes on a weekly or biweekly basis.
·
Encouraging
strong collaboration and daily interactions enables teams to identify and
remove roadblocks early and pragmatically iterate designs and solutions.
·
Delivery
time and risk of failure is minimized simultaneously.
As digital-first disruptors reshape the business
landscape, customer demands for more digital services and operational expertise
are posing a challenge to incumbent players across all sectors. The response
calls for a new operating model that puts the customer’s needs and wants at the
center of a digital transformation strategy, enabled by redesigned customer
journeys and agile delivery of insights and services.
By
Oliver Ehrlich, Harald Fanderl, and Christian Habrich
http://www.mckinsey.com/business-functions/operations/our-insights/mastering-the-digital-advantage-in-transforming-customer-experience?cid=other-eml-alt-mip-mck-oth-1705&hlkid=83f7dfe913c941be91ad6f5017d20b69&hctky=1627601&hdpid=e782c5ad-9522-48fb-9df0-88ae2f1a040b
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